UK property has long been a sought after investment regardless where you live. London property was the most expensive. London was beating out places like Hong Kong and Tokyo. The rest of the UK also saw investment, but no area saw the gains than those seen in the UK’s capital city. Brexit may have changed this for now but what is the effect for property moving forward in this post-Brexit world?

Commercial property demands are changing
More businesses are heading online. Start-ups want to work with each other in co-working spaces as opposed to office blocks. Certain office configurations such as clusters of technology and developer landscapes benefit from significant tax relief for both owner and tenant. Property performance is very closely correlated with economic growth and as the UK economy goes so will property valuations. We therefore have to surmise that the outlook for UK property is one in which value can be found by investors looking for income and less concerned about short term capital growth. In an environment within which we are seeing low growth as well low interest and gilt rates the income stream from property will remain attractive.

The Positive Side

On the bright side, occupiers and developers seem to have digested the initial shock: the phones are ringing and market values are holding up as many people don’t see alternative investments to put proceeds into. For example, the bulk private renting and build-to-rent markets are hot and pregnant with opportunity. Funders are keen and active as yields are about 5% net. In addition, Local Authorities are looking to waive the affordable housing requirements which will support efforts to reduce housing shortages. The long term demographics of local areas and, in particular, retirement living schemes are irresistible to investors.

Yes, there have been plenty of reports of an imminent financial crash, followed by a deepening recession. The pound has gone into a tailspin and there’s no doubt things are very uncertain right now. On the other hand, there are two sides to every coin and it’s impossible to predict the future at the best of times, let alone make sense of things part-way through a crisis.

The referendum result was a shock. But more and more people in the know are starting to get excited about the long term prospects for Britain’s housing market and its investors. The Leave campaign may have won the day but in the medium to longer term, the prospects for UK residential property remain strong.

Its difficult enough trying to get your kids to understand that someone ACTUALLY has to pay for the credit card and that there is no magic money tree. But more frightening the is fact that they are a couple of years away from the possibility of owning one and it is left down to the parents to explain what compound interest is – and that if they don’t understand it, there could be dire and far-reaching consequences.

Young adults today have the advantage of growing up with the technology so it is second nature to them, but they are deluded into thinking that they are ‘tech-savvy’ when it comes to understanding financial markets and institutions. Things like the value of the pound and inflation are what ‘old people’ talk about and definitely not their territory.

So I now have the task of trying to catch my two in a receptive mood and spend it on giving entertaining examples of how understanding compound interest really might benefit them – which could go either way. It could end up being one of the those wonderful moments we remind ourselves of in the future – “Oh, do you the remember the time, Dad, I realized that you really loved me when you took the time out of your busy schedule to explain compound interest to me?” It could go like that or… oh well. Never mind.

Imagine how relieved I was when on Monday the Bank of England announced that in November they will be conducting a ‘Future Forum’ and thinking of how to communicate better with this age-group. They are making big effort to make economics relevant to them. After all, these teens are the borrowers of the future.

At Henley Finance, we take a lot of care making sure that our clients understand the commitment that they take on. We find people can be successful in one area of business but when it comes to borrowing, we need to explain some of the finer points. Luckily, when it comes to detail our borrowers are more receptive than my teenagers. So good luck to the Bank of England on that one.